Dowrick the relationship of principal and agent problem

dowrick the relationship of principal and agent problem

Puttingitall together Answer guidelines See the problem question at the start of the Law Dowrick, F. E. () The Relationship of Principal and Agent. The problem that has troubled the law for many years is the proper definition or Sometimes such authority can be implied into the agency relationship by virtue of what is implicit in Dowrick, Francis. “The Relationship of Principal and Agent. Principal agent relationships can often be helpful for accomplishing a number of personal or business tasks. Having someone else (i.e. an.

The term "agent" is used in ordinary speech to describe any person who acts on behalf of another. But the term " agent" in law certainly has a more restricted meaning.

A legal agent has often been defined in terms which denote the whole range of persons who act for and with the authority of others,57 and the judges have often used the term loosely with this denotation. For example, in Foley v. Hill59 the question came before the House of Lords whether a banker who simply received moneys from his client and credited them to the client's account was the agent of his client.

It was held that in such cases a banker is not an agent, but only a debtor of his client. Yet the man in the street would readily agree that a banker who takes his money and credits it to his account, acts on his behalf and with his authority. In this case Lord Brougham drew a valuable distinction between case a where a banker simply receives money from his client on condition of paying it back when asked for, and case b where the banker receives, say, exchequer bills from his client, and the banker undertakes to receive interest on them, or to negotiate them and to credit the proceeds to the client's account: Further, in Towle S Co.

White,61 the que-sion came before the House of Lords whether N was an agent of T on the following facts: T supplied N with goods along with a price-list; N was to dispose of the goods to customers if he coulk N was not obliged to pay for the goods unless he disposed of them; N was to return a 57 e. Halsbury's Laws of England, 3rd ed.

White 6 Ch. Would T be liable in contract to the ultimate purchaser, X? Would T be competent to sue the ultimate purchaser, X? Could the persons whom N employed to dye the goods sue T for costs? Since the answer to all the tests was "No," it was held that N was not the agent of T, but a purchaser from T.

If so, he is an agent. These authorities point to the essential characteristic of an agent. The essential characteristic of an agent is that he is invested with a legal power to alter his principal's legal relations with third persons It is submitted that this power-liability relation is the essence of the relationship of principal and agent.

The rules which normally attach to the parties, the normal incidents of the relation, are ancillary to this power-liability relation. To satisfy principals' claims in a myriad of cases the judges have imposed on agents certain rules constituting safeguards against the abuse of their powers.

To satisfy agents' claims for reimbursement the judges have granted certain rights to agents. But the parties, the best judges of their own interests, may exclude these normal incidents of the relation by their agreement.

The theory that the essential characteristic of an agent is that he holds a power to alter his principal's legal relations with others was advanced first by Hohfeld: It was developed by Seavey: It is one of the bases of the American Restatement of the Law of Agency: But only a few English text-writers have appreciated this theory.

Salmond expressed it in his draft of the Law of Contracts: Powell has now adopted it in his Law of Agency But neither Hanbury in his Principles of Agencynor Bowstead nor his editors, nor the editors of the third edition of Halsbury's Laws of England have referred to this theory.

The English judges have occasionally described an agent as holding such a power: Lever [] 1 Q. Lubbock 20 Beav.

dowrick the relationship of principal and agent problem

Breen 12 App. A power-liability relation is one of the fundamental legal relations. Agency is but one of the numerous kinds of power-liability relations recognised in our legal system. The distinctive feature of the agency power-liability relation is that the power of the one party to alter the legal relations of the other party is a reproduction of the power possessed by the latter to alter his own legal position.

In other words, the power conferred by law on the agent is a facsimile of the principal's own power. This is to be inferred from the main principles of the law of agency, notably the following: This manifest similarity between the principal's capacity to perform acts in law and his agent's capacity to perform them for him was formerly rationalised, as Holmes has explained,65 by the fiction that principal and agent were one person in law.

Pollock's analysis was more penetrating: Authority is a matter of fact: The legal attribute of an agent, his power, may be called into being by the fact that he has his principal's authority to act, but it may be called into being by other facts, such as the necessity of the case.

But in common law special legal relations are not to be confined within the strait-jackets of definitions; elegantia juris may be achieved only at the expense of the dynamic element in our law. Moreover the distinctions between agency and these other special legal relations cannot be so sharply drawn. Suffice it to assert that in mid-twentieth-century English law the nucleus of the rules in the doctrine of principal and agent is this power-liability relation.

Finally, it remains to restate the normal incidents of agency in terms which establish their connection with this essential powerliability relation.

Principal-Agent Problems | LegalMatch Law Library

An agent is bound to use reasonable care in the exercise of his power. An agent is bound to obey the lawful instructions given to him by his principal concerning the exercise of his power as agent. An agent is under a duty to make no profit out of any transaction connected with his power as an agent, without the approval of his principal. An agent is bound to make a full disclosure of any personal interest he may have in any transaction which he has the power to effect as agent.

An agent is under a duty to hand over to his principal on demand any property, whether money, goods or land, which he has received in his capacity as agent. Barker 2 F. Gibb 11 Q. Voules 1 E. Moy [] 1 K.

dowrick the relationship of principal and agent problem

In all these cases there was a contract between the parties and the courts treated this duty as contractual.

In the latter case the Court of Appeal decided that the duty of a stockbroker to obey his client's instructions concerning the purchase of shares was a contractual duty for the purposes of the County Courts Act,s. Nevertheless it is submitted that the duty attaches even to agents who act gratuitously.

An agent who has the power to purchase property for his principal and in fact purchases the property in his own name, becomes the trustee of that property for the benefit of his principal. An agent who receives money or goods from or for his principal in the course of his agency is bound to keep that property separate from his own and that of others,81 unless there is a trade custom to the contrary.

An agent who has the power to effect several or complex transactions for his principal is under a duty to render accurate accounts to his principal on demand.

An agent is bound to act in the best interests of his principal. An agent owes a duty to his principal, both during and after the period of agency, not to make use of materials or confidential information acquired in the course of his agency in a manner detrimental to his principal's interests.

An agent is under a duty to disclose to his principal any information he possesses which is likely to influence the principal's judgment in agency transactions 85or transactions inter se. When an agent has promised to exercise his power, and the principal has relied on the promise, and the agent fails to do so, he is bound to inform the principal of the fact within a reasonable time.

An agent is disabled from delegating his powers to a sub-agent unless his powers extend to the appointment of a sub-agent. A principal as well as an agent has the power to terminate the relation of agency at will. An agent has a right to an indemnity from his principal against losses and liabilities which he may suffer in the course of his agency. Malz [] 2 K.

Law of Agency: Authority and Power (the paradigm case) | CarlosJames

Exceptionally an agent who is a bailee of goods from his principal can plead jus tertii: Bond 6 B. Lemon [] 2 K.

Evans [] 1 Ch. Wheeler [] 1 K. Oelrichs 6 Scott Jarvis 4 Bing. An agent has a right to retain possession of goods and chattels belonging to his principal until his right to an indemnity or to remuneration is satisfied. Prima facie these rules apply to principals and agents whenever the relation of agency is created. But in particular cases some of them may be excluded by abnormal circumstances, such as the fact that the agent is an infant, or that the relation is not fiduciary, or that it has only been created by ratification or under necessity, or that it is for the purpose of doing an unlawful act.

Further, these incidents may be excluded from a particular relation by the agreement of the parties to the contrary. With respect it is submitted that such a consensual model so profoundly expressed by his Lordships as the basis of agency falls short by some degree of accuracy. Notably, the House of Lords in Boardman v Phipps, [34] held that an agency relationship existed even though there was no consent on the part of the principal.

However, power according to the likes of Dowrick [35] seeks to encompass the different facets of agency law. Apart from treating contractual arrangements as a matter of fact and not law, it fails to fully account for the existence of developments in agency law, such as agency of necessity, and forcibly continues to stretch its limits to cover other doctrines such as undisclosed principal and apparent authority, and in so doing, unveils its apparent weaknesses.

As such, in certain cases an agent who is neither expressly nor apparently authorised to do certain things may nevertheless have power to bind his principal and confer rights on a third party. Additionally, while academics such as Fridman and Dowrick argue that the consent model focuses predominantly on the relationship between principal and agent the power model expands its branches to external relationships between both parties and third parties which is essentially a more realistic understanding of true agency.

Convergent and complimentary approach McMeel appears to have constructed a thought provoking analysis in his thesis which this writer considers somewhat of a breakthrough in the war of theories in agency law. This theory is not to be completely written off and put to hang at the gallows for its limited use in expanding agency relationships but should nevertheless be seen as a fundamental aspect of agency law along with the accommodating role of the power-liability theory.

It seems more evident to view it as a supplement to authority and not replace it. Accordingly, they both work in a definitive marriage, by fact and through public policy law as Authority is self-imposed from principal to agent while power is an obligation given by law regardless of consent. There is essentially the need for such obligation to protect rights of all parties in agency, especially where fiduciary duties are not clearly expressed.

In some cases, the principal can be held liable; in some cases, the agent may be solely liable. The agent usually owes a basic duty of loyalty to the principal. There can be many other principal-agent problems, including privacy issues, non-compete issues, and others.

Principal-Agent Problems

These will all depend on the individual contract between principal and agent. However, an agent may be held personally liable for conduct performed during the agent-principal relationship when there was not such authorization given by the principal and the agent acted in a way that constitutes misconduct, engaged in illegal activity, or violated business standards.

This can happen if the agent has stepped outside the boundaries of the agency relationship. For instance, suppose an agent uses a company car long after their shift is over, and injures a person with the car. However, such determinations may be different for each case.

In most cases, it isn't feasible to monitor the agent directly so the agent should be offered incentives to act in the best interest of the company.

For instance, the agent may be given a bonus based on the financial performance of the company.

dowrick the relationship of principal and agent problem

Alternatively, the agent may be given shares in the company.